The world economy needs a growth-lifting strategy, and infrastructure financing seems to hold the key. Based on the New Structural Economics (Lin, 2010; 2012) we discuss the heterogeneity of capital focusing on the long-term versus short-term orientation (STO). Traditional neoliberalism assumes that capital is homogenous, complete capital account liberalization is “beneficial”. However, previous studies have found evidence of long-term orientation (LTO) in the culture of many Asian economies (Hofstede, 1991). In this exploratory paper, we suggest that the LTO can be considered a special endowment which, under certain circumstances, can be developed into a comparative advantage (CA) in patient capital. If these countries can turn their latent CA into a revealed CA in patient capital, and develop the ability to “package” profitable and non-profitable projects in meaningful ways, they would have a “revealed” competitive advantage in infrastructure financing. The ability to “package” public infrastructure and private services is one of the key institutional factors for success in overseas cooperation.

China’s Belt and Road Initiative (BRI) hopes to deliver trillions of dollars in infrastructure financing to Asia, Europe, and Africa. If the initiative follows Chinese practices to date for infrastructure financing, which often entail lending to sovereign borrowers, then BRI raises the risk of debt distress in some borrower countries. This paper assesses the likelihood of debt problems in the 68 countries identified as potential BRI borrowers. We conclude that eight countries are at particular risk of debt distress based on an identified pipeline of project lending associated with BRI.

Because this indebtedness also suggests a higher concentration in debt owed to official and quasi-official Chinese creditors, we examine Chinese policies and practices related to sustainable financing and the management of debt problems in borrower countries. Based on this evidence, we offer recommendations to improve Chinese policy in these areas. The recommendations are offered to Chinese policymakers directly, as well as to BRI’s bilateral and multilateral partners, including the IMF and World Bank. 

Starting from the ‘90s, there has been a significant increase in PPP use in the public sector in Europe, benefiting the implementation of infrastructure projects. In Italy, PPP is still much more limited than in such countries as the UK and France: the projects funded are smaller and the sectors involved are less appropriate. Based on the economic literature, European initiatives and international comparisons, the paper examines aspects of regulations that could encourage the appropriate use of PPP and considers the problems with the Italian regulations, while proposing some corrective measures. The main limitations involve: i) the absence of adequate preliminary assessments about the advantages of using PPP rather than the traditional procurement, ii) the relative lack of attention to the contract terms, iii) inadequate safeguards to ensure the bankability of the projects, and iv) limited information transparency and accessibility.

While infrastructure provides necessary public services and is vital for the socio-economic development of a nation, public funds alone cannot finance all infrastructure needs in society, especially after the COVID-19 pandemic, where many countries are facing budget deficits. Although private financing schemes, such as public-private partnerships (PPPs) and land value capture, have been considered intensively, they have yet to produce adequate private capital flows to infrastructure projects due to a lack of incentives for private investors. Against the background, this paper proposes a new financing mechanism in which governments might divert some of the increased tax revenue from the spillover effects of newly constructed infrastructures to fund the private sector through grants or subsidies. The empirical work in Vietnam shows a significant increase in tax revenues after completing two expressways, supporting our idea about spillover effects, which includes small- and medium-sized enterprise (SME) development. This study’s results suggest that spillover effects can bring new opportunities for governments and multilateral development banks (MDBs) to implement infrastructure projects with greater private sector involvement in the region. It also proposes some financial schemes, such as land capture and financing for business startups, including SMEs, to enhance the spillover effects of infrastructure.